May 6, 2004 minutes

May 6, 2004 Meeting Minutes

MINUTES

DRYCLEANER ENVIRONMENTAL RESPONSE TRUST FUND
COUNCIL of ILLINOIS

HOLIDAY INN SELECT
NAPERVILLE, ILLINOIS

MAY 6, 2004

John Polak, Chairperson, called the Drycleaner Environmental Response Trust Fund Council of Illinois meeting to order at 10:06 a.m. A quorum was present. Roll call was taken with the following members present:

John Bredenkamp (joined the meeting via telephonic conference at 10:09 a.m.)
Augustine Chung (via telephonic conference)
David Gibson (joined the meeting at 10:14 a.m.)
Young B. Kim
Jerry Lewicki
John Polak

Also present were:
H. Patrick Eriksen, Program Administrator's Office
John McCarthy, Program Counsel
C. Michael Perkins, Program Administrator's Office
Juho So, Program Administrator's Office

PRELIMINARY BUSINESS

The minutes from the March 18, 2004 Council meeting were reviewed. On a motion by Mr. Lewicki and a second by Mr. Kim, the minutes were approved by a vote of 4-0.

Mr. Polak stated that since Mr. Bredenkamp and Mr. Gibson were not yet in attendance at the meeting that he would move to the Operational Issues on the agenda.

OPERATIONAL ISSUES

A. Enforcement Action Against Unlicensed Drycleaning Facilities:

Mr. Eriksen reviewed with the Council his memorandum noting that he has had preliminary discussion with the Attorney General's office regarding their assistance in taking appropriate enforcement action against known active unlicensed drycleaners who refuse to come into compliance with the licensing requirements of the Trust Fund Act. A letter was sent to the Attorney General's office with Council approval, requesting their assistance and he has had several telephone conversations with them since the last Council meeting. Their preliminary indication would be that they would work with the Council in sending a "cease and desist letter" and would take the appropriate civil legal action to shut down any unlicensed drycleaning facility. Mr. Eriksen indicated he was still waiting for a definitive written response from the Attorney General's office on this issue.

The Administrator's office continues to physically verify if unlicensed facilities are either active or inactive. If they are found to be active, a licensing application and DS-3 form are left with the drycleaner operator, instructing them how to complete the application and make the appropriate payment and a time deadline for completing the licensing process.

Mr. Bredenkamp joined the meeting via telephonic conference at 10:09 a.m.

B. Policy Issue - Determination of Facility Status for Determining Level of Remedial Claim Benefits:

Mr. Eriksen noted that at the March 18, 2004 Council meeting, the Council had considerable discussion regarding the definition of an active drycleaning facility and its impact on drycleaners in determining facility status for remedial program benefits. The Council requested the Administrator and legal counsel re-review the issue and report back at a future Council meeting regarding the definition of facility status for determining remedial claim benefits.

Mr. Eriksen noted the Trust Fund Act 415 ILCS 135/5(f) defines "drycleaning facility" as a facility located in this state that is or has been engaged in drycleaning operations for the general public. In addition, the statute defines "inactive facility" as a drycleaning facility that is not being used for drycleaning operations and is not registered under this Act.

Under the remedial action account section of the Act (415 ILCS 135/40(h) "A drycleaning facility will be classified as active or inactive for purposes of determining benefits under this Section based on the status of the facility on the date a claim is filed."

Mr. Eriksen reviewed two (2) examples in applying the definition as defined in the Act. He noted that the Administrator and Mr. McCarthy believe the Act is very clear that the status of the claim (i.e., either active or inactive) is determined based on whether the facility is drycleaning clothes at the facility on the date the claim is received by the Administrator's office. To be classified as an active remedial claim, the following criteria must be met:
a. The facility must be licensed as an active drycleaning facility in the year the claim is filed with the Fund; and
b. The facility must be periodically operating the drycleaning machine for retail business on the date the claim for remedial benefits is received by the Administrator's office; and
c. The facility must have maintained pollution liability insurance coverage in the amount of $500,000 as defined in the Act, effective July 1, 2000 and remain continuously in effect for the time period that the active drycleaning facility was in operation.

Facilities with a drycleaning machine that is not operating (at least periodically) or has been removed from the facility on the date the claim is received by the Administrator's office will not be eligible for active remedial benefits under the Act. Mr. Eriksen further noted that the Administrator accepts the claimant's representation as to the facility status when they filed the claim unless there is information that is submitted or subsequently becomes known to the Administrator that contradicts the status. An example would be an instance in which a consultant's report indicates that at the time of their visit and intrusive testing, there was not a drycleaning machine at the facility or it was inoperable.

Mr. McCarthy concurred with the Administrator's interpretation of active versus inactive. The Council stated that they concurred with the Administrator's interpretation and instructed the Administrator to continue using the criteria as defined.

Mr. Gibson joined the meeting at 10:14 a.m.

Mr. Polak stated the next agenda item for discussion is the license late payment penalty appeal.

APPEAL OF LICENSE LATE PAYMENT FEES

Mr. Eriksen reviewed with the Council background information noting that Mr. Simon Choi is the current owner/operator of Spring Cleaners, facility #0003035, located at 2735 111th Street in Naperville, IL. Mr. Choi purchased the business from Mr. Yong Koo on July 15, 2002 and Mr. Koo initiated drycleaning operations at this facility in October 2001.

Mr. Choi represented to the Administrator's staff that Mr. Koo had advised him that he did not need a license to operate the facility because the drycleaning machine uses Green Earth solvent. Mr. Choi mentioned this conversation to a friend in December 2003 and his friend informed him that he still needed a license even though he uses Green Earth solvent. Mr. Choi contacted the Administrator's office in December 2003 and requested a license application and information for licensing his facility.

The Administrator's office received his license application on January 16, 2004. License fees were paid as follows:
Calendar year 2002 - $ 250 - paid December 30, 2003
Calendar year 2003 - $ 500 - paid February 6, 2004
Calendar year 2004 - $1,000 - paid December 30, 2003

The Administrator's office assessed late fees for calendar year 2002 in the amount of $2,655 and late fees in calendar year 2003 in the amount of $2,005, for a total of $4,660.

Mr. Choi appealed the late payment fees in a letter dated March 13, 2004 which was received by the Administrator on March 17, 2004. The Administrator denied his appeal of the license late payment fees on March 23, 2004 and Mr. Choi appealed the Administrator's decision to the Council on April 1, 2004.

Mr. Choi addressed the Council and Dr. Juho So assisted in translation of Korean to English. Mr. Choi indicated to the Council that it was his understanding from the previous owner that he did not need a license fee as he was already paying a $2,500 franchise fee to the manufacturer of Green Earth solvent. He stated the solvent supplier did not mention anything to him that his facility needed to be licensed by the Trust Fund and it was not until the end of 2003 that he became aware of a need to have a license. Mr. Choi indicated that his failure to pay the license fee was due to a lack of understanding of the requirements by himself and the fact that neither his attorney nor the prior owner indicated that his facility needed to be licensed. Mr. Choi asked the Council to waive the license late payment fees totaling $4,660. Mr. Lewicki stated that he has compassion for Mr. Choi's situation and asked Mr. McCarthy if the Council can approve an amount less than the $4,660. Mr. McCarthy replied the Council has discretion to lower the penalty or waive it altogether.

After discussion by the Council, on a motion by Mr. Lewicki and a second by Mr. Kim, the Council, by a vote of 5-1, waived the license late payment fees for calendar years 2002 and 2003 for Spring Cleaners in the amount of $4,660.

C. Updated Financial Projections for the Period of July 1, 2003 to January 1, 2020:

Mr. Eriksen reviewed with the Council that enclosed in their packet were updated financial projections for the Fund for the period of July 1, 2003 through the Fund's sunset date of January 1, 2020. Assumptions used in developing the projections were attached to the projections.

He noted the following changes in the projection assumptions as compared to the projections reviewed at the February 3, 2004 meeting:
1. Licensing revenue is decreased from $1,809,000 per year to $1,625,000. Current projections reflect actual licensing payments by category for calendar year 2004.
2. The number of estimated active remedial claims is reduced by 30 to reflect a reduction in the estimated number of claims that will be filed by drycleaners with private pollution liability insurance policies.

The net impact of the reduced revenues and reduced expenditures is neutral with an anticipated deficit at the end of the sunset period of $31,645,820. This assumes that 950 drycleaning facilities file claims for remedial benefits and that solvent taxes and license fees remain constant through the remaining years of the Fund.

The Council conducted a discussion of the financial projections. Mr. Eriksen indicated that he did not believe that the Council would need to adjust the solvent taxes or license fees in the near future but that a more detailed analysis would be presented at the 2004 Strategic Planning Meeting which is tentatively scheduled for July 22, 2004. The Administrator is updating their budget approval cost statistics that will be reviewed with the Council at the next meeting. This is being done at the request of the Council based on questions raised by Mr. Kim as to whether the Council was getting a competitive price for the services being rendered by the environmental consultants.

D. Compliance Program Issues:

Mr. Eriksen noted that the Administrator has received a number of questions asking for further clarification to the compliance program revisions made by the Council at their February 3, 2004 meeting. The questions and his proposed response are listed in his memorandum to the Council.

Question #1: The revised compliance program guidance document does not explain the consequences of not correcting deficiencies within the time specified in the inspection report.

Answer: It is the Council's intent that if the deficiencies are not corrected within the appropriate timeframe, that the compliance program would either not issue the initial compliance program certificate or cancel the existing certificate. It is the responsibility of the compliance program to make certain that the deficiencies are resolved timely or else cancel their compliance certificate and notify the Fund of cancellation.

Question #2: Regarding employee training, there is no minimum training frequency and each compliance program may establish a different frequency.

Answer: It is the Council's intent that each employee receives at the time of employment, training on the state and federal regulations involved with the handling and storage of the drycleaning solvent and respective waste. These regulations are referenced in Section 1 of the Council's Compliance Program Requirements document. This initial training must be completed within two (2) weeks of the employee's start date. The program does provide discretion to the compliance programs to determine if more frequent employee training is beneficial and/or necessary.

Question #3: Regarding continuing education, the compliance guidelines do not define "who is an owner or manager" entitled to obtain CEUs. For example, if both the owner of the drycleaning facility and the day-to-day manager attend the same CEU course which has been approved by the Fund as eligible for one (1) CEU, will it be considered that that facility has received one or two CEUs for the training?

Every site inspection will qualify for two (2) CEUs regardless of the frequency of the inspections. Shouldn't the CEUs for site inspections be limited to two (2) hours annually?

Answer: The CEU requirement is designated for the drycleaner owner/operator. They are required to obtain four CEUs during the calendar year. If they own/manage more than one facility, they would only need four CEUs that would cover all of the facilities that they own or operate. If the drycleaner owner/operator is not involved in the day-to-day operation of the facility, he may designate an operations staff member as the one who will need to obtain the four CEUs annually for that specific facility.

At this time the Council does not believe there is a need to limit the number of inspections that may be conducted and thus qualified for CEUs. If subsequent audits of the compliance programs indicate a potential abuse exists, the Council will revisit the issue at that time.

Question #4: Regarding the third party compliance audit, how is this different from the site inspection? Is the auditor different from the inspector? In addition, the program says the auditor must be "qualified," "approved," and with "no conflicts of interest." This will probably preclude the most talented people from being inspectors or auditors.

Answer: A compliance audit is the same as the site inspection being performed by the compliance program. Regarding the conflict issue, that would only come into play if the auditor/ inspector had an ownership interest or management role in the business being audited/inspected. At this time, the Council does not believe that this will result in a large number of conflict of interest situations.

Question #5: Under general requirements, it requires an issuance of a compliance certificate valid for up to two years, but the certificate will be backwards looking, certifying only that the facility had met the requirements looking backwards.

Answer: This is incorrect. The program is forward looking and that a compliance certificate, once issued, will be valid for up to two years. The CEU requirement is the only backward looking feature of this certification and, if within the first calendar quarter of each year the CEU is not appropriately documented, the Council assumes that the compliance program will cancel their certificate issuance and notify the Council of that cancellation.

Based on review and discussion by the Council, on a motion by Mr. Lewicki and a second by Mr. Kim, the Council approved the responses to questions 1, 2, 4 and 5 as presented by the Administrator by a vote of 6-0.

Regarding question 3 on the continuing education, there was substantial discussion on whether more than one site inspection annually should qualify for two (2) CEUs. Henry Parker of S&ECC stated that it was his understanding that the Council was going to allow no more than two (2) CEUs annually for site inspections. Mr. Eriksen replied that that was not what the Council adopted. He stated that since a site inspection was approximately two (2) hours in length that each and every site inspection would count for two (2) CEUs.

After further discussion by the Council, on a motion by Mr. Polak and a second by Mr. Lewicki, the Council determined that a site inspection would qualify for two (2) CEUs but the maximum number of site inspection CEUs that can be applied annually to the compliance program requirements is two (2). The motion passed by a vote of 6-0.

E. Audit Report for Fiscal Year 2003:

Mr. Eriksen reviewed with the Council that enclosed in their packet was a copy of the fiscal 2003 audit report that was complied by the CPA firm of Sikich, Gardner & Co, LLP under the direction and supervision of the Illinois Auditor General's office. He indicated an original copy of the report had been previously sent to each Council member under separate cover.

Mr. Eriksen reviewed the audit report with the Council, noting there were no findings of non-compliance noted by their special state audit tests, which are required to be disclosed and the audit commended the Council for maintaining effective internal controls.

Mr. Eriksen stated that he had been recently notified by the Auditor General's office that Sikich, Gardner & Co, LLP would be conducting the audit of the Fund for fiscal year 2004 and that Sikich would be contacting us to scheduled fieldwork in the near future.

F. Legislative Updates:

Mr. Eriksen noted that there currently is no new legislation pending before the Illinois legislature this session that should impact the Fund. SB2105, which would modify the definition of green solvents and change the licensing structure and solvent taxes for green solvents is being held in committee and it is his understanding this bill will not come out of committee this session.

HB4268 was introduced this session and would require the Illinois EPA to provide notice to all households and businesses within 2,500 ft of contamination that exceeds the applicable Federal or State health and safety standards that may pose an imminent or substantial endangerment to human health or the environment. A companion bill, HB5960, is currently making its way through the House and most likely will be passed in some form this legislative session.

Mr. Eriksen noted the impact of this bill on the Fund is not known but would definitely create more public awareness of contaminated properties in the state. He noted he will keep the Council updated on any legislation that may impact Fund participants.

APPROVAL OF PROGRAM BILLINGS

Mr. Eriksen stated that there were three (3) bills requiring Council review and action. The bills for Council review are as follows:

1. Williams & Company Consulting, Inc $ 70,433.00
Standard flat fee billing for March 2004, licensing, underwriting, claims processing and site inspections.

2. John J. McCarthy $ 1,492.50
Professional legal services to the Council for the period of March 5, 2004 through April 27, 2004.

3. Williams & Company Consulting, Inc $ 74,061.00
Standard flat fee billing for April 2004, licensing, underwriting, claims processing and site inspections.

On a motion by Mr. Bredenkamp and a second by Mr. Lewicki, the bills were approved by a vote of 6-0.

REVIEW OF ACTIVITY REPORT AND FINANCIAL STATEMENTS

Mr. Eriksen reviewed the March 31, 2004 Activity Report with the Council noting as of that date there were 1,195 licensed facilities. The number of licensed facilities is currently 1,290, with total claims or potential claims being filed to date exceeding 500.

The Fund is currently insuring 894 facilities with 37 applications still under review.

The Fund balance at the end of March was $6,560,560. Claim payments year-to-date total $1,640,451. Claim payments for the month of March were $351,325 and he indicated April should be comparable with payments of almost $400,000.

OTHER ISSUES AS PRESENTED

Mr. Eriksen noted that there were several other issues for discussion, the first being the next Council meeting. After discussion by the Council, they established Wednesday, June 16, 2004 as the tentative meeting date.

Mr. Eriksen stated that the JCAR hearing on the Council's amended rules would be May 18, 2004 in Springfield. He would keep the Council updated on the results of that hearing.

Mr. Eriksen had one other current issue regarding the sale of solvent between drycleaners. He has been contacted by two (2) drycleaners, one who wishes to purchase used solvent from another drycleaner who has sold his perc machine and replaced it with a hydrocarbon machine. The issue for discussion was if the solvent is sold from Drycleaner A to Drycleaner B, does the $10 per gallon solvent tax apply in this transaction? Mr. Eriksen stated that it has been represented that a registered distributor would transport the solvent from Drycleaner A to Drycleaner B.

The Council conducted substantial discussion of the issues. On a motion by Mr. Bredenkamp and a second by Mr. Lewicki, the Council voted to waive in this specific case the $10 per gallon solvent tax on the sale of drycleaning solvent from Drycleaner A to Drycleaner B. The motion passed by a vote of 6-0.

PUBLIC COMMENT PERIOD

Mr. Peter Marberry of Marberry Cleaners spoke and stated that he had a definitive concern regarding three (3) issues that the Council either took action on or discussed at the Council meeting today.

The first was Mr. Choi's appeal. He feels that the solvent penalty should not have been waived as it takes away money from the Fund. In addition, the supplier of the solvent should be fined for selling to an unlicensed drycleaner. The second was regarding the Council's decision to allow Drycleaner A to sell solvent to Drycleaner B. He feels the Council's decision is in violation of the current statutes that only a licensed supplier is allowed to sell solvent and that drycleaners should not be able to sell solvent to other drycleaners. The third is whether the Council had received any quarterly reporting of the solvent tax collection from the Department of Revenue.

Mr. Eriksen responded that regarding the quarterly reporting of solvent tax, the first quarter tax was due by April 20th and he would expect by approximately June 1, that we would receive the quarterly information from the Illinois Department of Revenue. Regarding Mr. Choi's appeal, he stated that the Department of Revenue would be notified of the solvent supplier who had delivered Mr. Choi's solvent when he was not a licensed facility.

Mr. Yong Yu, environmental consultant, inquired that if the real estate owners do not allow intrusive testing, who would be responsible for any cleanup of the facility? Mr. Eriksen stated that this would be a legal and a business issue that the drycleaner owner/operator would have to work out with the real estate owner.

Mr. Henry Parker, of S&ECC stated that he objects to the Council only allowing one (1) CEU for a drycleaner owner/operator in which the owner and the manager attend the same seminar. He feels that two (2) CEUs should be awarded.

Mr. Gibson left the meeting at 12:12 p.m.

Mr. McCarthy noted for the Council that he has reviewed Section 67 of the Act and Mr. Marberry is correct in that only an individual or corporation registered with the State of Illinois can sell drycleaning solvent to a drycleaner. The Council conducted additional discussion regarding their decision to allow the waiver of solvent tax when Drycleaner A sells solvent to Drycleaner B. On a motion by Mr. Polak and a second by Mr. Lewicki, the Council, by a vote of 4-1, rescinded their decision to waive the solvent tax when Drycleaner A sells solvent to Drycleaner B.

Mr. Polak made a motion that the Council would waive the solvent tax only if the seller is registered in accordance with Section 67 of the Act. This was seconded by Mr. Kim and approved by a vote of 5-0.

There being no further business, the Council adjourned at 12:15 p.m.

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